June 8, 2011

Exploit West’s Knowledge

Outside North America, the licensing markets are a prolific diversity in their own right and require localisation content not just for licensing, but also for any effective sales and marketing terms, and India is no exception to this rule. Stephen Gould gives an insight into the Indian story of licensing.“No powe...

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Outside North America, the licensing markets are a prolific diversity in their own right and require localisation content not just for licensing, but also for any effective sales and marketing terms, and India is no exception to this rule. Stephen Gould gives an insight into the Indian story of licensing.

“No power on earth can stop an idea whose time has come.” Dr Manmohan Singh, then Finance Minister of India, quoted Victor Hugo, while presenting the Union Budget 1994-95, making a reference to the Indian economy’s unlimited potential. If Dr Singh were to use the quote again today, he would probably apply it in context of the promise contained in the Indian retail industry and, in particular, the organized retail in India in the days to come. Retailing in India is currently estimated to be a $200 billion industry, of which organized retailing makes up 3 per cent or $6.4 billion. By 2010, organized retail is projected to reach $23 billion and grow by 25-30 per cent p.a., thereafter. (KPMG and FICCI: Indian Retail – on the fast track. Bridging the capability gaps.) Licensed merchandise is very much integral to the organized retail industry and its expected prolific growth in urban areas in particular. Whilst there is large potential in rural areas, the complexity of the business environment, fragmentation, retail manpower, capability shortages and the cost of market access are deterrents in transplanting a successful international format directly. There is little doubt in the business community in general, that India represents one of the largest (if not the largest) potential consumer markets anywhere in the world. Its sheer size and population of 1.3 billion, makes it an attractive potential target for most consumer product marketers, as well as global retailers. The key word, however, is ‘potential’. Upon closer inspection, the business picture of India that emerges is of a nascent marketplace for most consumer products, including licensed goods, with a growing middle-class and a developing large store retail infrastructure. By most estimates, only a third to a quarter of the population constitutes a realistic target for most consumer products and the premiums that come with ‘emotional gratification’, which is the basis of licensing, will squeeze this market still further.

Premature maturity
Few would disagree that licensing, as a business entity and marketing tool, has attained accelerated and prolific growth in recent years and that in both North America and the European big 5 (UK, France, Italy, Germany and Benelux) at least, it has reached, what is for some, a self-imposed premature maturity. Most would also concur that licensing by it’s very nature, is oriented to the US, not because of claims to political or cultural leadership, but because it is as Dean Rusk put it—“the fat boy in the canoe”—when it moves, all must adjust accordingly. Indeed, Canadian organisational theorist Henry Mintzberg has commented dryly that what we often call globalisation is more often simply—American management spreading around the world. In the context of the secure evolvement of licensing, this is an area that also needs redress. In delineation terms, Europe or indeed Rest of World is not the fifty first states! The licensing business as we know it in Europe, and perhaps more specifically in the UK  has already started to splutter in the ether of over-expectation and unsophisticated under-investment.

Re-kindle creative core
Excessive leverage, a voracious appetite for cash and reliance on inadequately researched creative content are all conducting rods for criticism. Coupled with increased competition, the desire for a quick return for both investor appeasement and the CEO bonus, the influx of parameter dilution and a much more savvy and commercially aware retail distribution base, something has to shift in an endeavour to rekindle the creative core and infrastructure of what intellectual property and all it’s respectable ancillarisation are firmly rooted in. In our mature industry, we need to think differently about how we work and in the ways in which we allocate resources. Being creative isn’t just about words and pictures—  it’s about making something new from something we’ve already got. But, it is more than just a variation of a theme, and if properly nurtured, it can be the defining element in the success that we all live and strive for. In playing for safety, we often lose the magic. Magic creates dreams, dreams build emotional connectivity and positive connections are the building blocks of perennial brands. We are scared of getting lost and yet, if we don’t get lost, how will we find a new route? Knowledge comes from the past, so it’s safe. It is also out of date. As human beings, we’re wired for safety. Unfortunately, in the new experience economy, it is not what has gone before that is important, but rather what is yet to come. That doesn’t just mean the next hot property—it also means the way we approach our trade. Knowledge is indeed power, however, only if it’s up to date. It’s the opposite of originality and experience is the opposite of being creative. By sticking to what we know, we quash any creativity. By not pushing our own boundaries through well reasoned and scientific chance-taking, we punch innovation square on the nose and stall the momentum of lateral thinking. This isn’t the behaviour of a creative industry is it? In effect, we have reached what Malcolm Gladwell refers to as our ‘Tipping Point’ and only those with a Darwinian instinct for survival and the lateral foresight to pre-empt the goldfish bowl syndrome, will shine through to both success and profitability. By necessity, there must be different, better and best way for sales and marketing in the licensing arena. There are no short cuts to a place worth going!
Return of entrepreneurial ethos

Creativity and innovation are being sacrificed for fiscal rectitude—everything has to come in on time and on budget,  whatever the cost. In today’s marketplace, the vision is being guided by clear-thinking strategic planners, marketers, statisticians, politicians, social engineers, accountants and bankers and creative heads are hired as mere help. In this arena, where the system has choked out that ‘spoonful of sugar’, the bigger players have over-egged their financial expectations and the small guy lacks the resources to exploit this state of flux. This is the opportunity for the return of the entrepreneurial ethos, with creative longevity as the benchmark. Now is the time to join this revelation and the necessary, but ancillary unbridled evolvement in thought, word and deed. What needs to be done is evolution— evolution in thinking, evolution in approach, evolution in understanding and evolution in partnership.
Consumers build brands

The industry tends to see parents and grandparents as the persons who pay. Nothing is wrong with that. However, if we want them to pay again and again, we would better do something about making them feel good about their purchase. In a competitive and mature market, you must know your consumer inside out, upside down and back to front. This means that you need to know kids, parents and grandparents—not just the ones you know, but the ones that live a different life from yours, the ones that aspire, the ones that are worried, and the ones that form opinions. These are the people that build brands. We need to depersonalise our mindset to personalise our offering. We live in a different era to the one that established the industry.  We live in a very different economy. Joseph Pine, author of ‘The Experience Economy’ argues that we live in an economy where ‘companies must realise they make memories not goods’. But, in order to make memories, you need to make goods that are capable of generating positive recall. The industry must innovate—everything has changed, except our way of thinking. Change is one of life’s only true constants. Indeed, cynics might say that licensing’s deepest well of innovation at present, is the one from which accounts are drawn.

Little more thought
Innovation means taking a chance. There are rationalised chances and there are gut feel chances. Innovation is a bit of both. The beauty is that we can get better at rationalising and we can get better at gut feel. In the FMCG world, established and forward thinking techniques enable brand teams and their partners to stay ahead of the game by being both extremely analytical and openly intuitive. Analysis from the parent’s and child’s perspective is a necessity, if we are to ensure our licence cuts through all the other on-shelf noise. Intuition is a little more exciting. Intuition is where the magic lives — it’s that something you can’t quietly put your finger on because you’re a grown-up. Remember, we are not the target market. With a bit of effort it’s actually quite easy to improve your intuition. So why don’t we just get on with it and take a chance? We can even make sure that success is almost a given. The licensed industry is littered with products that could have been better with just a little more thought. Take for example a licensed baby’s mobile currently available at most specialist retailers  the clock work motor lasts, at best three minutes and you need two hands to wind it. How many mums do you know that have two hands available when they’re looking after their babies? How many babies do you know that will be satisfied with just three minutes of an enchanting tune? Why not simply make the motor a battery motor with variable lengths of time available to mum? Is the reason cost or is it poor research or insufficient insight? Whilst the market permits us to keep putting out mediocre products at inflated prices, we will get away with it. But, times are changing and they are changing fast. The licensee that produces first in category leading product is going to be the one that not only gets the hottest licenses, but also the one that gets workable terms, profitable returns and utopian consumer respect. We must take a leaf from the book of the FMCGs and actually take the time and make the investment to understand who our consumers actually are and how they interact with our products in the real world. We can then use this consumer insight to create products that work  all of the time, for all the right reasons.

Lessons worth learning
There are many lessons India can take from other countries that have moved along the path of licensing evolution. Organisations that experiment and innovate across different aspects will be the ones that emerge as winners. So the challenge for India moving forward is to harness the contextual learnings of the west and to pioneer the game of evolving catch-up, by embracing true licensology, in pursuit of a more measured, factual, creative, innovative and sophisticated approach to what is one of the most exciting and exhilarating business models and marketing tools on the planet

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